Opinionista• Jeff Rudin • 25 May 2014

The problematic politics Of Eskom

Is privatisation of Eskom the solution to its problems? Not necessarily. That is, nationalisation is not necessarily the problem: the organisation’s problems are political. Privatisation is really just treating the symptoms, not the cause.

Common to most answers is that state ownership – nationalisation – is the problem and that privatisation, in one form or another, is the solution.

Yet State Owned Enterprises (SOEs) – the respectable term for social ownership when the mere mention of nationalisation is a taboo associated with communism and socialism – are entrenched and successful in most countries worldwide. Indeed some of the world’s largest and most influential companies are Chinese SOEs. Moreover, many cities around the world are re-municipalising (insourcing) previously privatised (outsourced) services such as water, as in Paris, for instance. Indeed, municipal insourcing is most pronounced in the self-proclaimed home of private enterprise, the USA.

For many left-wing groups, however, these SOEs and other forms of public ownership are not proper nationalisations. For them, nationalisation must be subject to workers’ control. How worker’s control would be a solution to Eskom’s plight is not developed.

Similarly, neither the National Union of Metal Workers of South Africa (Numsa) nor the Economic Freedom Fighters (EFF) – the current champions of nationalisation – say how the nationalisation they promote differs from Eskom’s actual one.

In reaction to Numsa and the EFF, the ANC sometimes claims to have already nationalised South Africa’s entire mineral resources and water supply. And they have the legislation to support their claim: the Mineral and Petroleum Resources Development Act of 2000 and the National Water Act of 1998 respectively.

Which, then, of nationalisation’s multiple meanings is being used by the many people who identify nationalisation as Eskom’s main problem?

My answer begins with a simple reminder: Until the blackouts of 2008, Eskom was not a problem; it was in fact a (now-forgotten) singular success producing what was claimed to be the cheapest electricity in the world. Eskom’s electricity was so cheap precisely because, being nationalised, it was not driven by the imperative of maximising profit but could instead prioritise cheap electricity as a government subsidy to industry, above all to the energy-intensive mines. Eskom owes its existence to this very fact: the then-privately owned, profit-maximising monopoly – the Victoria Falls and Transvaal Power Company – was nationalised, in the name of the public interest, in 1948.

By nationalising Eskom for the public good, the South African government was doing what governments around the world had done in earlier times and continue to do to this day. Forgotten is that many nationalised industries and services began as private enterprises that were subsequently nationalised because they were too small, insufficiently capitalised or too destructively competitive (just think of South Africa’s never-ending taxi wars despite the government-enforced creation of regional and national taxi associations as a proxy for nationalisation) to meet either the needs of the economy or society as a whole. Britain, for instance, nationalised water in the 19th century, in the interest of public health, when the link between cholera and unsafe water was established and the rich, who could afford to buy water, were nonetheless falling ill to the water-borne contamination.

This broader societal perspective brings us to a particular confusion: the idea that nationalisation is part of a ‘mixed economy’; an economy of two disparate realms, the public and private, which somehow co-exist despite their inherent differences. Nationalised industries or enterprises supposedly stand in opposition to a ‘pure’ capitalism based on private ownership and the imperative of profit maximisation; hence the idea of the ‘mixed’ economy.

Conflict between the public and private is real from the perspective of individual capitalists; the public sector does restrict or complicate individual profit maximising in many ways. However, governments of necessity need to give priority to the interests of the collective capitalists and the society shaped around those interests.

For governments acting in this broader economic and social context, acting, that is, in what is called the public interest, there is only one economy: a capitalist economy that needs state support in many ways and for a multiple of reasons. Nationalisation plays this essential supporting role, a role that by design compliments capitalism and its social structures rather than challenging them in any substantive or sustained manner.

This is most clearly seen when capital actually invites the state to fill the required economic or social spaces that aren’t sufficiently profitable for the private sector. Thus, one of South Africa’s leading bankers, Stephen Koseff, the CEO of Investec, recently called on the government “to look after things the private sector doesn’t want to touch because it is not economically viable”.

The public sector’s complementary role to capital is most dramatically illustrated when the state intervenes to save capitalism by nationalising some of its industries, banks or corporations; turning private debts into colossal public ones, and then handing the corporations back to their private owners once the immediate crisis is over. Variations of this mark the modern centre of free enterprise, the US. It still happens in the birthplace of free competition, Britain, and does so under the leadership of the proudly self-proclaimed defenders of capitalism, the Conservative Party.

The current worldwide dominance of neo-liberalism, which further entrenches giant corporations and makes outsourcing the normal business practice for both the private and public sectors, shapes capitalist nationalisation. In South Africa, the main SOEs have all been corporatised – turned into stand-alone businesses registered as private companies complete with their own shareholders. Their main difference from private companies is that the shareholder is the state. Like private companies, they have their own boards, are expected to be financially self-sufficient and indeed to make a profit. As has been said of nominally nationalised Rand Water, “public is as private does”.

It is this internalisation of what ‘private does’ that allows for the seamless absorption by top private corporations of top public officials. Tito Mboweni’s move from Governor of the South African Reserve Bank to Chairman of AngloGold Ashanti is illustrative, as is the just-announced appointment of Eskom’s former financial director Paul O’Flaherty to the position of CEO of the steel maker Arcelor-Mittal, where he will meet his former boss Mpho Makwana, who is now Chairman of the steel giant.

In sharp contrast to capitalist nationalisation, there is socialist nationalisation. This is social ownership and control of industries or enterprises in an already established or transitional society in which the economic imperative is not profit maximisation regardless of what is produced, how it is produced or the human, climate, ecological and resource costs incurred.

For present purposes, it is necessary only to recognise the fundamental differences between nationalisation under capitalism and the form it could take under a still-to-be fully realised socialism.

Eskom is not only a nationalised entity under capitalism but under neo-liberal capitalism. Reverting back to its pre-neoliberal days would be a huge step forward. Moreover, re-prioritising its public interest mandate, a mandate made all the more urgent by climate change and the need for a low-carbon economy, would be another immediate step. Both these steps require a radically new politics.

This new politics would also address government policy incoherence that on a grand scale bedevils Eskom. Examples include:

The government’s insistence that part of Eskom should be privatised – even though the guaranteed return on capital was insufficient to attract capital – delayed the building of extra capacity and caused Eskom’s current inability to meet demand

Eskom is mandated to be cost effective while simultaneously promoting BEE regardless of cost

Despite its commitment to a low carbon economy, the government has allowed Eskom to build two of the world’s largest coal-powered stations, much to the delight of what has been called the Minerals Energy Complex in which BEE is deeply embedded as a junior partner

Eskom’s management is required to be of the very highest calibre while simultaneously meeting the mechanistic demands and compounding abuses of Affirmative Action. The Municipal Services Amendment Act of 2011 and its Regulations underscore the enormity of the general abuse by cadre deployment, cronyism and patronage. The scale of the problem is sufficient for legislative intervention to make illegal the employment of senior (municipal) managers who do not have the prescribed “skills, expertise, competencies and qualifications”.

Notwithstanding the government’s promotion of energy efficiency, the Treasury will penalise Eskom financially should energy efficiency savings result in the demand for electricity being less than Eskom’s predictions.

Climate change compounds the mixed messages. Far from promoting renewable energy as both an alternative to carbon-coughing coal and as an additional supply of energy, Eskom is predisposed to obstructing anything that threatens the demand for its electricity.

The ultimate absurdity is that, while Eskom is expected to provide the cheapest electricity for both the economy and domestic use, it has also to pay off its enormous debts. This results in Eskom having to increase its price for electricity as it simultaneously reduces its costs.

Eskom has real problems with no quick and easy solutions. Privatisation is welcomed by the few who would profit enormously at public expense. Capitalist nationalisation, however, is, in itself, not the cause of Eskom’s problems. The problems are political that only a government with different politics and coherent policies can address.

We, the people, elect the government. We don’t elect the private owners of corporations; nor do we elect their overpaid managements. DM

Jeff Rudin

Jeff Rudin works at the Alternative Information & Development Centre (AIDC), having returned home in 1994 after spending the previous 28 years in England. His other paid work since my return has been as a Parliamentary researcher for the ANC and as the National Research Officer for the South African Municipal Workers Union.